The company operates in the retail sector, based throughout England, and initially sold fashion clothing. The clothing offered for sale included a variety of alternative fashion styles, identifying a market in body piercing and tattooing. The decision was taken to provide a clinically excellent body piercing service which was seen to be in keeping with the fashion styles offered for sale.
The company traded successfully for many years. Its success brought expansion and additional shop premises were leased. However, from 2009 the effect of the recession was being felt within the company. Many of the new leases had been negotiated during the earlier boom period. A certain number of stores were underperforming and the high rents were dragging the business down.
During early consultation with KSA, it was decided to consider the profitability of each store separately, with a view to closing down stores which were individually unprofitable and therefore had a negative effect on the company’s profitability. The flexibility of the CVA procedure is an ideal vehicle through which to achieve this. Three stores were closed with an annual saving in rent and rates in excess of £200k.
Unfortunately, this also led to redundancies, but the annual wages bill was reduced by in excess of £121k.
A few additional stores were considered with a view to their closing. However it was considered that if their rents were reduced, they would show sufficient profitability to be an asset to the company. Negotiations, on that basis, proceeded with those landlords.
The landlords all decided that the best way forward was to agree to the new leases. Year rolling leases were negotiated with a two month notice period either way. The new leases included a significant rent reduction. In addition, the dilapidations were examined and a figure agreed as at the end of the original leases. The dilapidations claim was included in the CVA. In addition, a cap was put on dilapidations going forward.
The detailed CVA proposal was put to creditors and accepted at the creditors’ meeting. Careful preparation and meticulous examination of the accounts and financial information provided, enabled the restructuring plan to be devised and accepted by creditors.
Categories: CVA, What is a CVA or Company voluntary arrangement?